Warren Buffett's Biggest Loser Stocks

Has Berkshire Hathaway’s CEO & Chairman Lost His Investment Touch?

Mar 10, 2009
Daniel Workman

Warren Buffett Keeps His Eyes on Long-term Value - Wikipedia Commons

If they can conquer fear, Berkshire Hathaway's value investors should rejoice at opportunities to buy undervalued, high-quality shares at today's discounted prices

As the first week in March 2009 ended, the market value of Berkshire Hathaway stock holdings had shrivelled by US$17.4 billion or one-third of its value just over 2 months earlier on December 31, 2008.

That staggering paper loss is about the same as the combined total value of American exports to Colombia and Peru in 2008.

Stated another way, 40 of the 41 stocks that Berkshire Hathaway owns are down an average of 33.6%. That bleeding happened over a little more than 40 trading days.

Here are some other striking facts about Berkshire Hathaway’s biggest stock losers since late December:

39 equities have lost more than 12% of their value
33 equities have lost more than 20%
15 equities have lost more than 37%.

Berkshire Hathaway’s own share price (stock symbol BRK.b) has gone down 27.6% over the same period.

Berkshire Hathaway Stocks Showing Greatest Price Declines

As of March 6, 2009, the following Berkshire Hathaway holdings have eroded in value at the fastest percentage rates since the end of last year.

Bank of America … Down 77.7% or -$54.7 million since December 2008 to US$15.7 million
Gannett Inc … Down 72.5% or -$20 million to $7.6 million
Wells Fargo … Down 70.8% or -$6.1 billion to $2.6 billion
SunTrusts Banks … Down 68.3% or -$64.7 million to $30 million
US Bancorp … Down 64.7% or -$1.1 billion to $595.8 million
Torchmark … Down 61.8% or -$78.1 million to $48.2 million
General Electric … Down 56.4% or -$71.1 million to $54.9 million
USG Corporation … Down 46.6% or -$64 million to $73.2 million
Wabco Holdings … Down 46.5% or -$19.8 million to $22.8 million
American Express … Down 44.7% or -$1.3 billion to $1.55 billion
M & T Bank … Down 44.5% or $171.6 million to $213.8 million
Norfolk Southern … Down 41.7% or $38 million to $53 million
Constellation Energy Group … Down 38.2% or -$190.8 million to $308.4 million
Lowes … Down 37.8% or -$52.8 million to $87 million
Eaton Corporation … Down 37.4% or -$59.5 million to $99.6 million
United Health Group … Down 32.7% or -$54.8 million to $112.8 million
Ingersoll-Rand … Down 31.8% or -$42.9 million to $92.1 million
ConocoPhillips … Down 31.7% or -$1.3 billion to $2.8 billion
Burlington Northern ... Down 29.4% or -$1.6 billion to $3.75 billion
United Parcel Service ... Down 28.6% or -$22.6 million to $56.3 million.

Derivatives Drive Warren Buffett Crazy

Share prices for the above 20 companies have plummeted by $12.3 billion. And that's just so far this year. Half of these firms are enterprises heavily immersed in financial services, accounting for $9-billion of that loss in value.

Financial services are heavily impacted by the global meltdown in investing and consumer confidence.

In Warren Buffett’s February 27 letter to Berkshire shareholders, the Oracle of Omaha points to the dangers of derivatives that have:

Dramatically multiplied leverage and risks in the American financial system
Effectively prevented investors from understanding and analyzing the largest U.S. commercial banks and investment banks
Allowed major U.S. financial institutions including Fannie Mae and Freddie Mac to repeatedly misstate their earnings.

Derivative losses have led to an ongoing crisis in global credit, which puts intensive stresses even large and profitable financial institutions like American Express.

ConocoPhillips Stock Timing Error

Warren Buffett shoulders sole responsibility for several poor investment choices in 2008. Berkshire’s Chairman and CEO bought over 60 million shares of integrated oil company ConocoPhillips at a premium as oil prices peaked last year.

Since December, Berkshire Hathaway has lost a remarkable $1.3 billion on paper due to ConocoPhillips’ sliding equity value. Yet one has to admire the courage of the Oracle of Omaha admitting to a novice investment mistake, trying the impossible task of timing the market for highly cyclical commodity stocks.

Book Values of Depressed Berkshire Hathaway Stocks

While there is room for more bad news including dividend cuts or suspensions, 15 of Berkshire Hathaway’s 20 worst-performing stocks are trading at share prices below their latest estimated book values. Similarly, 75% of these companies remain profitable as of their latest reported quarter.

Bank of America … US$3.14 share price at March 6, 2009 (8.9% of book value)
SunTrusts Banks … $9.36 (14.8%)
USG Corporation … $4.29 (27.4%)
Wells Fargo … $8.61 (36.7%)
Gannett Inc … $2.20 (47.5%)
M & T Bank … $31.85 (51.8%)
Ingersoll-Rand … $11.84 (56.7%)
US Bancorp … $8.82 (58.8%)
Torchmark … $17.06 (65%)
General Electric … $7.06 (71.1%)
Eaton Corporation … $31.11 (81.3%)
Wabco Holdings … $8.45 (89.9%)
Constellation Energy Group … $15.50 (91.6%)
ConocoPhillips … $35.36 (97.5%)
American Express … $10.26 (98.6%).

Short-term Pain for Long-term Gain

The recent stampede out of stock market holdings into cash or near-cash investments seems short-sighted. This is especially true given the festering inflationary forces that will eventually diminish the buying power of so-called “safe money”.

An immediate turnaround for the U.S. economy or global stock markets is not yet on the horizon. However, none of the past stock market corrections or crashes were resolved by a single event or sudden reversal of fortune.

Eventually, investors become fatigued with the continual doom-and-gloom declarations that the sky is falling.

Confidence will slowly return to the marketplace as investors clearly separate and focus on the value that they get for stocks versus the prices they pay.

Sources for this Article

This article presents independent calculations and insights based on SEC filing 13F for December 31, 2008 on Edgar.com, publicly available company reviews from TD Canada Trust and the Oracle of Omaha’s 2008 shareholder letter.